Senegal: Behind the guise of competitive prices

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By LC for APCNews

CALGARY, Canada, 10 September 2009

Internet cafés are increasingly closing their doors Internet cafés are in decline in Senegal. These access points to knowledge and communication, once found on every street corner in Dakar and open day and night, are no longer so widely available. Thanks to the infrastructure and development of bandwidth put in place by incumbent operator Sonatel, the high cost of internet has fallen rapidly, from XOF 1,000 (USD 2.15) or 1,500 (USD 3.25) to XOF 300 (USD 0.65) or 200 (USD 0.43) an hour, making it possible for more people, from students to street vendors to private consultants, to surf the net from home (for those who can afford it) or elsewhere at a relatively accessible price. Nevertheless, cybercafés and internet service providers have suddenly begun to close up shop, because the market is no longer flourishing. A saturated market of internet cafés means that fewer businesses have managed to survive the crisis facing the sector.

The arrival of ADSL, promotional offers launched by the incumbent and the price policy established have allowed Sonatel to reap healthy revenues, while cybercafé owners are barely able to turn a profit after handing over what they must pay to Sonatel and covering other operating costs such as rent, electricity, equipment and staff. Even though prices have dropped, it is still a large expense in comparison with the average monthly income of most Senegalese. In response to this situation, a new operator has emerged: Expresso. Its general director, Emmanuel Hamez, promised lower costs for telephone and internet users in Senegal, but two years after Expresso was granted a global operating licence, prices remain dependent on the Sonatel monopoly.

When it comes to ICTs in Senegal in general, the reforms of the 1990s worked relatively well, and the cost of telecommunications services are moderate compared to other countries in Africa like Uganda Kenya or South Africa, where prices are even higher still. The services themselves are also of relatively good quality. More than ten years after the reforms and the liberalisation of the market, the sector is making good progress, at least on the surface. So what is the problem?

The problem lies in the anticompetitive nature of current telecommunications sector’s set-up: a state-owned monopoly. The power of the Senegalese telecoms regulator, ARTP, is limited because the state operator Sonatel, has the monopoly over the market and telecoms regulator. The state still holds a major portion of shares, of which it has been seeking to sell a small part for some time, continues to dominate the telecommunications market. Since Sonatel, as the incumbent operator, controls the basic infrastructure, it would appear that any telecommunications project in Senegal must pass through it, thus creating a situation of fake competition despite the presence of three mobile telephony operators (Orange, Tigo and Expresso). This lack of real competition has an impact on the public, which is still waiting for affordable prices for fixed telephony and internet services, especially in rural areas. Sonatel continues to almost completely control these market segments, and its monopoly is far from over. Given such a dominant position on the part of the incumbent, one is forced to wonder what it will take to bring an end to this situation.

Expresso: The broken promise of competition

The arrival in 2008 of a new global telecommunications operator, Expresso, raised hopes that the end of Sonatel’s monopoly was finally in sight. But rather than offering real competition in the fixed telephony, international long distance or internet market segments, where it is so badly needed, Expresso quickly dove into the mobile market, on the pretext that this is the service that is most used and most demanded by the public. While there is obviously a high demand for mobile service, there are already two other operators in this segment, and what the public really wants is more competitive pricing in services other than mobile telephony. In the meantime, Sonatel remains the only operator in the high-demand fixed telephony, international long distance and internet markets.

According to Jacques Iyok, a communications consultant and chair of the communication and advocacy committee of GOREeTIC, “The Senegalese public, who believed that the monopoly would come to an end with the arrival of Expresso and the liberalisation of telecommunications services, were quickly disappointed. The alternative operators are still not able to offer services and no other enterprise can offer public access to the network through wireless technologies such as satellite or radio in the local loop (RLL). Competition is referred to on paper but in practice it’s another matter. The small internet service providers are unable to propose competitive rates and are forced to accept the tariff conditions imposed by the incumbent operator. All of the less costly alternative technologies such as voice over internet protocol (VoIP), WiMAX or wireless are prohibited for public use.”

Many feel that despite its technological innovations and gradual introduction of its services, Expresso has made a rather timid entry into the Senegalese telecommunications market, added Iyok, although the market is ripe for operators offering more modern services at competitive prices. “Fixed telephony and internet service are virgin territories in Senegal, and the public is still waiting for Expresso to enter these segments. This would hopefully create strong competition in the market and free consumers from Sonatel’s harmful monopoly.” Expresso’s slowness in launching operations in these segments could be considered a form of complicity between operators, and of course it is the patiently-waiting consumers who must pay the price. The ARTP, in its role as telecommunications watchdog, would do well to speed up the process, since it is meant to serve the public interest.

A bad referee makes for a bad gameCybercafé sign in Dakar

The functional separation of the management and commercialisation of services could lead to lower prices. Since Tigo and Expresso depend on the prices fixed by Sonatel, it is Sonatel that ultimately determines the conduct of the other operators who are also seeking to make a profit, and it is this dependence that essentially eliminates competition. The total independence of the regulator from the incumbent would help to remedy this conflict of interests.

Economist Moubarak Lô believes the ARTP should oblige operators to play by “fair rules” and put pressure on Sonatel to bring down its prices. Since Tigo and Expresso cannot offer lower prices than the rates fixed by Sonatel, a reduction in prices for end-users largely depends on the interconnection charges proposed by Sonatel and approved by the ARTP.

But the power does not lie solely in the hands of the ARTP. A coherent ICT policy in Senegal is also important for lowering prices and improving infrastructure, stressed Iyok. “Senegal needs a national ICT strategy, which does not yet exist. The ARTP has proposed a document that is considered a sort of national policy, but it has still not been approved.” The ARTP, which represents the Senegalese state and should encourage the development of the ICT sector, has been very slow in promoting a policy that would motivate this development.

A lack of willing players

The government of Senegal appears to recognise the value of ICTs for the country’s economic progress. It has created the State Informatics Agency (ADIE), which has a mandate to increase the availability and use of ICTs in government agencies. The ADIE has promoted the adoption of four laws that have ushered Senegal into the information society: a law outlining the general guidelines for the information society in Senegal by drafting up the current ICT-related legislation; a law on cybercrime; a law on the protection of personal information; and a law on electronic transactions. But there remains an urgent need to place ICTs at the centre of the country’s economic development. In the framework of the government’s Accelerated Growth Strategy, ICTs have been defined as an important component for development in pursuit of the Millennium Development Goals (MDGs). It remains to be seen how this will be put into practice.

The lack of motivation in the ICT sector has led to a situation where Senegal, despite widely recognised initial successes in the field, seems to have reached a standstill: young graduates have difficulty finding work and there are no visible structures specialised in financing ICT-related projects.

Today, in the face of the global financial crisis, many businesses that formerly purchased ICT services are cancelling their contracts, leading to the closing of ICT service providers who cannot withstand their heavy overhead costs. the demise in cybercafés is therefore, merely a symptom of a much larger problem. Senegal clearly has a long way to go yet when it comes to ICT and telecommunications reforms, despite some rather impressive accomplishments in this key domain in the national, regional and global economy.

This article was written as a part of APC’s Communication for influence in Central, East and West Africa (CICEWA) project, which is meant to promote advocacy for the affordable access to ICTs for all. CICEWA seeks to identify the political obstacles to extending affordable access to ICT infrastructure in Africa and to advocate for their removal in order to create a sound platform for sub-regional connectivity in East, West and Central Africa.